Why Facebook would buy Waze: To fight Google for mobile search

The navigation app would give the social network a way to insert itself into the lucrative mobile search business owned by Google.

Waze in Facebook Home

Rumors that Facebook is in late-stage talks to buy Waze for as much as $1 billion have many wondering if the social network's next great ambition is to tackle the maps and navigation market. Maybe -- but only because maps would be Facebook's best way to route around Google and make money from mobile search.
Founded in 2007, Waze makes a navigation application for iPhone and Android used by roughly 45 million people. The app's mapping service is powered by the people who use it. Waze ingests all types of location data as shared, either implicitly or explicitly, by drivers. The app also connects to Facebook and incorporates social-networking functions so drivers can see their friends' whereabouts on the map, share their location, and even send private messages.
Should Facebook buy Waze, the social network will send a clear message to Google: "Watch out! We're on your tail."
Facebook would like to be a formidable force on mobile and not just capture attention, but ad dollars. If it has to get into the maps business to do so, so be it.
Waze Chief Executive Noam Bardin inadvertently said as much when he spoke at AllThingsD's D: Dive Into Mobile conference last month. The full interview is embedded below.
"What search is for the Web, maps are for mobile," he said. "The searches you do on mobile that actually are monetizable, and are different from the Web, are searches that have to do with location."
The search mechanism on mobile devices is the map, he said.

 

In Bardin's view of the mobile search land-grab, which revolves around great maps, there are just two players: Google and Waze. "Google is out there creating a new standard in terms of quality, and we feel that we're the only reasonable competition to them in this market of creating maps that are really geared for mobile, for real-time, for consumers -- for the new world that we're moving into."
Enter Facebook, a company that surely doesn't want to be left behind in the race to own mobile search.
By eMarketer's estimates, Facebook is the No. 2 mobile ad publisher in the U.S -- second only to Google. The social network accounted for 9.5 percent of mobile ad revenue in 2012 and will eat up 13.2 percent of the U.S. mobile ad market this year, thanks to its strength in the display category. Google, however, will take home more than half of all mobile ad revenue in 2013, according to the market research firm.

 

But when it comes to making money from mobile search, the real cash cow on mobile, Google is the uncontested leader. The search giant netted 93.3 percent of all U.S. mobile search ad dollars last year, and it will continue to maintain a suffocating hold over this particular mobile ad market through 2015, according to estimates from eMarketer. The firm anticipates that U.S. mobile Internet search ad revenue will total $7.85 billion in 2015; it pegs Google's share at around $7.1 billion, or 90 percent of the market.
Should Facebook buy Waze, the social network will have a way to insert itself into this lucrative business and help its 751 million mobile users better find what they're searching for on their smartphones.
Waze would also make for an attractive addition to what Bardin called Facebook's "meta operating system" for mobile, or the growing collection of Facebook mobile applications that ensure that no matter the phone or operating system, people will find themselves inside a Facebook environment.
It's a strategy the social network has actively pushed forward with its nascent Android Home software suite, as well with single app releases like Facebook Camera, Messenger, and Poke.